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It looks like Pandora isn’t the only streaming company having big financial problems. SoundCloud is reported to now be in a do or die situation where it must either raise some serious cash or sell for pennies on the dollar. The company has been trying to raise $100 million to keep the doors open for almost a year now with no success, and it hasn’t been able to find a buyer in that time either.
One of the reasons why a buyer hasn’t stepped up is that SoundCloud valued itself too highly, reportedly seeking $700 million, but now that number is said to have decreased significantly. The company has raised about $250 million so far (including $70 million from Twitter), so now any offer over that number will be considered, which just goes to show how dire the circumstances seem to be.
One of the big problems is that although SoundCloud reportedly has 175 million users, not many of them pay for the service. They’re mostly indie artists who use it has a repository for their music, and while that serves a major slice of the market, it’s not necessarily one that has been successfully monetized yet. Plus, that 175 million figure hasn’t been updated in 3 years, so it’s possible that its now even lower.
The company has tried to boost its revenue by launching two paid tiers, one $10 per month and the other more recently for $5, which hasn’t exactly set the world on fire. That’s because most music consumers go to the one of the larger services first before they consider SoundCloud, and just like any other streaming service, it’s very difficult to get someone to either buy an additional service or change from the current one that they’re using.
All this means that it’s entirely likely that the streaming landscape will face even bigger changes in the coming months. SoundCloud plays an important part in the indie music environment, but if you’re an artist, it might not be a bad idea to have a plan B ready.
SoundCloud is seeking a buyer, and that could make it much more difficult for indie music artists across all genres to have their music heard. The streaming music service is reportedly seeking a sale in the $1 billion range in a deal that could alter that part of the music landscape for a long time.
According to Bloomberg, SoundCloud execs are currently mulling over a strategy that would result in the sale of the company. No potential buyer has been identified however, and one may not be on the horizon at the valuation the company appears to be asking. Either way, it’s beginning to look as if the streaming service’s days are numbered, at least in the form that we know it today.
SoundCloud has sometimes been compared to an audio version of YouTube in that it’s basically a free service for user generated content, most of which is posted by indie music artists. It’s been good for that niche in that it’s easier and cheaper to post a music file to SoundCloud than to host on the artist’s private website or social media network. That said, the company was never going to earn enough revenue just from usage fees by artists, and it’s really not much of a draw for music fans when compared to any of the sites like Apple Music or Spotify that feature commercial music from label-signed artists. It may have 175 million users a month, but most are not high-volume listeners like on the larger services.
But what really hurt SoundCloud’s prospects for turning a profit is the fact that it was forced to sign expensive licensing deals with the major networks in order to avoid pending copyright issues, and to clear the way for the service to offer a subscription tier in an effort to finally increase revenue. While that sounds good on paper, the biggest distinguishing feature of SoundCloud is its indie artists, and that hasn’t proved to be enough of a draw when its free, so it’s difficult to imagine how it could work for a monthly fee. [Read more on Forbes…]